Hi, so basically I had a tutorial today about the social media industry is highly monopolistic...

Hi, so basically I had a tutorial today about the social media industry is highly monopolistic with Facebook, users provide Facebook (and 3rd-party companies) with huge amounts of data in exchange for access to the platform. provides Facebook’s algorithms with a clear picture of your preferences or demand for certain goods/services. Technological underperformance is a welfare cost associated with monopolies. For companies such as Facebook, innovation would be minimal due to lack of competition. There are many people argue that government should interfere.

From Industry perspective, could you please give some ideas to argue that the market doesn't work badly and the government should not interfere.

Homework Answers

Answer #1

There are two obvious reasons

1 Every economic unit lead by its profit motive results in greater good as propounded by Adam Smith. Govt intervention in economies like soviet union proved fatal

2 Facebook doesn't charge money for its use. So in this sense it is not like traditional monopoly which is harmful for consumers. Consumers willingly choose Facebook for its innovation. It is market leader not because of unfair competition but because of innovation. Consumers gain in many respects.The greater the no. Of consumers on such platform the more beneficial it is for all the consumers. There are positive network externalities involved in this consumption. E. G we can meet people ogf diverse background if platform is big.

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